NLIGHT INC

Previous wording

We operate in two reportable segments consisting of the Laser Products segment and the Advanced Development segment. Sales of our semiconductor lasers, fiber lasers, fiber amplifiers, and other directed energy laser products are included in the Laser Products segment, while revenue earned from research and development contracts are included in the Advanced Development segment.

Current wording

We operate in two reportable segments—Laser Products and Advanced Development —and we serve three primary end-markets—Industrial, Microfabrication, and Aerospace and Defense. Sales of our semiconductor lasers, fiber lasers, fiber amplifiers, and other directed energy laser products are included in the Laser Products segment, while revenue earned from research and development contracts are included in the Advanced Development segment.

Previous wording

Revenues decreased to $44.5 million in the three months ended March 31, 2024 compared to $54.1 million in the same period of 2023 due primarily to decreased sales in the Laser Products segment. We generated a net loss of $13.8 million for the three months ended March 31, 2024 compared to a net loss of $7.7 million for the same period of 2023.

Current wording

Revenues decreased to $95.0 million in the six months ended June 30, 2024 compared to $107.4 million in the same period of 2023 due primarily to decreased sales in the Laser Products segment. We generated a net loss of $25.5 million for the six months ended June 30, 2024 compared to a net loss of $16.6 million for the same period of 2023.

Previous wording

The decreases in revenue from the Industrial and Microfabrication markets for the three months ended March 31, 2024 compared to the same period of 2023 were a result of decreased unit sales due to lower customer demand and deteriorating market conditions. The increase in revenue from the Aerospace and Defense market for the three months ended March 31, 2024 compared to the same period of 2023 was driven by new research and development contracts, offset partially by a decrease in unit sales of laser products.

Current wording

The decreases in revenue from the Industrial and Microfabrication markets for the three and six months ended June 30, 2024, compared to the same periods in 2023, were driven by decreases in unit sales due to lower customer demand and deteriorating market conditions. The increases in revenue from the Aerospace and Defense market for the three and six months ended June 30, 2024, compared to the same periods in 2023, were the result of increased product unit sales and ASPs, and increased development revenue from new development contracts.

Previous wording

The decrease in Laser Products revenue for the three months ended March 31, 2024 compared to the same period of 2023 was the result of decreased units sales across each end market as discussed above. The increase in Advanced Development revenue for the three months ended March 31, 2024 compared to the same period of 2023 was driven by new research and development contracts. All Advanced Development revenue is included in the Aerospace and Defense market.

Current wording

The increases in Advanced Development revenue for the three and six months ended June 30, 2024, compared to the same periods in 2023, were driven by new development contracts. All Advanced Development revenue is included in the Aerospace and Defense market.

Previous wording

Geographic revenue information is based on the location to which we ship our products. There was no significant change in North America revenue for the three months ended March 31, 2024 compared to the same period of 2023 as decreased revenue from Laser Products was offset by increased revenue from Advanced Development. The decrease in China revenue for the three months ended March 31, 2024 compared to the same period of 2023 was the result of decreased sales to the Industrial market, partially offset by increased sales to the Microfabrication market. The decrease in Rest of World revenue for the three months ended March 31, 2024 compared to the same period of 2023 was due to decreased sales to both the Industrial and Microfabrication markets.

Current wording

Geographic revenue information is based on the location to which we ship our products. The increases in North America revenue for the three and six months ended June 30, 2024 compared to the same periods in 2023, were driven by increased revenue from the Aerospace and Defense market as previously discussed, offset partially by decreased revenue from the Industrial and Microfabrication markets.

Previous wording

Cost of Laser Products revenue consists primarily of manufacturing materials, labor, shipping and handling costs, tariffs and manufacturing-related overhead. We order materials and supplies based on backlog and forecasted customer orders. We expense all warranty costs and inventory provisions as cost of revenues.

Current wording

Cost of Laser Products revenue consists primarily of manufacturing materials, labor, shipping and handling costs, tariffs and manufacturing-related overhead. We order materials and supplies based on backlog and forecasted demand from our customers. We expense all warranty costs and inventory provisions as cost of revenues.

Previous wording

The decrease in Laser Products gross margin for the three months ended March 31, 2024 compared to the same period of 2023 was driven primarily by the impact of lower production volumes on fixed manufacturing costs due to the decrease in sales and customer demand. The increase in Advanced Development gross margin for the three months ended March 31, 2024 compared to the same period of 2023 was primarily the result of changes in the composition of research and development contracts. The first quarter of 2024 includes more revenue from fixed priced contracts that have higher average gross margins than cost-plus fixed fee contracts.

Current wording

The increase in Laser Products gross margin for the three months ended June 30, 2024, compared to the same period of 2023, was driven primarily by positive changes in sales mix, offset partially by the impact of lower production volumes on fixed manufacturing costs due to the overall decrease in customer demand. The decrease in Laser Products gross margin for the six months ended June 30, 2024, compared to same period of 2023, was driven by the impact of lower production volumes on fixed manufacturing costs due to the decrease in overall customer demand, partially offset by positive changes in sales mix for the second quarter of 2024.

Previous wording

The decrease in research and development expense for the three months ended March 31, 2024 compared to the same period in 2023 was driven by a decrease in stock-based compensation of $0.5 million.

Current wording

The decreases in research and development expense for the three and six months ended June 30, 2024, compared to the same periods in 2023, were driven by decreases in stock-based compensation of $0.7 million and $1.1 million, respectively, offset partially by increases in project-related expenses.

Previous wording

The increase in interest income, net, for the three months ended March 31, 2024 compared to the same period in 2023 was driven by an increase in interest rates.

Current wording

The increases in interest income, net, for the three and six months ended June 30, 2024, compared to the same periods in 2023, were driven by increases in interest rates and increased investment in marketable securities.

Previous wording

Changes in other income, net are primarily attributable to realized gains and losses on the sale of marketable securities and changes in net realized and unrealized foreign exchange transactions resulting from currency rate fluctuations. The increase in other income, net for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to realized gains on the sale of marketable securities.

Current wording

Changes in other income (expense), net, are primarily attributable to realized gains on the sale of marketable securities and changes in net realized and unrealized foreign exchange transactions resulting from currency rate fluctuations.

Previous wording

The decrease in income tax expense for the three months ended March 31, 2024 compared to the same period in 2023 was driven by a decrease in return to provision adjustments and accrued interest on unrecognized tax positions.

Current wording

The increase in income tax expense for the three and six months ended June 30, 2024 compared to the same period in 2023 was driven by expiring statutes of limitations on unrecognized tax positions in the second quarter of 2023.

Previous wording

We had cash and cash equivalents of $61.6 million and $53.5 million as of March 31, 2024 and December 31, 2023, respectively. In addition, we had marketable securities of $59.8 million and $59.7 million at March 31, 2024 and December 31, 2023, respectively. Our total balance of cash, cash equivalents, restricted cash and marketable securities increased by $8.2 million from December 31, 2023 to March 31, 2024.

Current wording

We had cash and cash equivalents of $49.6 million and $53.5 million as of June 30, 2024 and December 31, 2023, respectively. In addition, we had marketable securities of $65.2 million and $59.7 million at June 30, 2024 and December 31, 2023, respectively. Our total balance of cash, cash equivalents, restricted cash and marketable securities increased by $1.7 million from December 31, 2023 to June 30, 2024.

Previous wording

For the three months ended March 31, 2024, our principal source of liquidity was cash collected from customers. We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from period to period and will depend on many factors, including the timing and extent of spending on research and development efforts, the expansion of sales and marketing activities, the continuing market acceptance of our products and ongoing investments to support the growth of our business. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights. From time to time, we may explore additional financing sources which could include equity, equity‑linked and debt financing arrangements.

Current wording

For the six months ended June 30, 2024, our principal source of liquidity was cash collected from customers. We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from period to period and will depend on many factors, including the timing and extent of spending on research and development efforts, the expansion of sales and marketing activities, the continuing market acceptance of our products and ongoing investments to support the growth of our business. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights. From time to time, we may explore additional financing sources which could include equity, equity‑linked and debt financing arrangements.

Previous wording

During the three months ended March 31, 2024, net cash provided by operating activities was $11.4 million, which was the result of a $13.8 million net loss, offset by increases in working capital of $15.3 million and non-cash expenses totaling $9.9 million related primarily to depreciation, amortization, and stock-based compensation. The increase in working capital in the three months ended March 31, 2024 was driven by an $11.9 million decrease in accounts receivable, net, a $2.1 million increase in accounts payable, a $1.6 million increase in accrued and other long-term liabilities and a $2.7 million increase in deferred revenues, partially offset by a $1.6 million increase in prepaid expenses and other current assets.

Current wording

During the six months ended June 30, 2024, net cash provided by operating activities was $7.1 million, which was the result of a $25.5 million net loss, offset by increases in working capital of $10.5 million and non-cash expenses totaling $22.1 million related primarily to depreciation, amortization, and stock-based compensation. The increase in working capital in the six months ended June 30, 2024 was driven by an $6.9 million decrease in accounts receivable, net, a $1.4 million increase in accounts payable, and a $2.5 million decrease in prepaid expenses and other current assets.

Previous wording

During the three months ended March 31, 2024, net cash used in investing activities was $1.5 million, which was primarily for the purchase of property, plant and equipment.

Current wording

During the six months ended June 30, 2024, net cash used in investing activities was $8.9 million, which was driven by the net purchase of marketable securities of $5.2 million and capital expenditures of $3.7 million.

Previous wording

During the three months ended March 31, 2024, net cash used in financing activities was $1.6 million, which primarily consisted of taxes paid on the net settlement of stock awards.

Current wording

During the six months ended June 30, 2024, net cash used in financing activities was $1.8 million, which consisted of taxes paid on the net settlement of stock awards of $3.3 million, partially offset by proceeds from stock option exercises and employee stock plan purchases of $1.5 million.

Previous wording

We have a $40.0 million revolving line of credit, or LOC, with Pacific Western Bank dated September 24, 2018, which is secured by our assets and expires September 24, 2024.

Current wording

We have a $40.0 million revolving line of credit, or LOC, with Banc of California dated September 24, 2018, which is secured by our assets and expires September 24, 2024.

Previous wording

We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three months ended March 31, 2024, If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could materially adversely affect our business, financial condition and results of operations.

Current wording

We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three and six months ended June 30, 2024, If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could materially adversely affect our business, financial condition and results of operations.